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Thursday, November 17, 2016

Croatia Airlines to decide on Heathrow slot sale

Croatia Airlines and its owner, the government, will hold talks next week concerning the planned sale of nine weekly slot pairs at London's Heathrow Airport, following an outcry from industry professionals who argue the move will have a negative impact on the carrier's long term operations. Croatia Airlines denied yesterday's media reports it had been ordered to halt the planned sale by its shareholder. However, both the carrier and the government will discuss one final time whether relinquishing slots is the only option for maintaining liquidity at the company. Following the talks, a final decision will be made. Croatia Airlines is currently in talks to sell its departure and arrival times at one of the world's most congested airports with several carriers.

According to Croatia Airlines' CEO, Krešimir Kučko, the airline has generated a loss of 37.5 million euros on its Zagreb - Heathrow service over the past thirteen years despite a high average cabin occupancy rate. Mr Kučko added the company is unable to compete against British Airways, which handles a significant number of transfer passengers on the route. Revenue generated from the sale would be used to cover debts and the upcoming heavy maintenance of several aircraft. In a statement, the Croatian Ministry for Sea, Transport and Infrastructure, noted, "It is important to avoid solutions that would provide only short-term benefits but could pose significant problems for Croatia Airlines in the near future".

Earlier this month, Mr Kučko said Croatia Airlines would likely withdraw from Heathrow by the second half of 2017. "I do not understand all the fuss concerning one destination. It is just one of our 35 destinations and its suspension is foreseen in our restructuring plan for 2015 and 2016. In 2015 we decided it was not the right time to discontinue flights and this turned out to be a wise decision. We will go through with it this year, partly because of accumulated losses which the route has been generating for years, and partly because of unsettled dues from the past which we must resolve". Mr Kučko added the airline would consider flying to another one of London's airports.

Unlikely, what I think is happening is that Mr Kucko is trying to get some nestegg for himself, he'll no longer be the CEO of Croatian Airlines come April 2017, and he is trying to sell the steak @Heathrow and get bit of bonus for the sale, I say bonus, about $2-3 million for himself.

OU owns 9 double daily slots, an option would be to lease two daily slots, for $5 million over 10 year period per slot. That's easy $10 million, OU still owns all 9 slots just the two slots OU has leased out for 10 years.

After that OU could take over the two slots that were leased and re-leased it again or use it if there's need for it. OU is making a ton of money on the route, but for some reason they're saying they're loosing money. I'd like to see the financial books and going back to 2000.

$10 million from lease can be used to prop up OUs operations and any work that needs to be done on current fleet. OU isn't making massive profits cause of corruption and theft with in OU's own management.

Leasing is illegal. If OU would try to lease its slots it would lose them without any compensation. The slots are not a property of any airline. The only thing tolerated is a "swap". First the buyer applies for slots in the middle of night, when nobody wants to travel. Then they "exchange" these slots with OU for daily slots. LHR approves the "exchange". OU does not use the middle of the night slots and loses them after some time. The compensation has nothing to do with LHR, which turns a blind eye on this illegal practice. There is no place for leasing in this scheme.

LHR almost does not have slots in the middle of the night because of night ban. Night-time flights at Heathrow are subject to restrictions. Between 23:00 and 04:00, the noisiest aircraft cannot be scheduled for operation. In addition, during the night quota period (23:30–06:00) there are huge limits.

Thus, leasing is impossible.Open selling is not allowed. Only "exchange" can be approved. The compensation is tolerated. There are almost always free night slots. You apply for them promising to fulfill all the conditions, because your intention is not to use them, but to make the exchange.

Well this sounds encouraging from the government: "It is important to avoid solutions that would provide only short-term benefits but could pose significant problems for Croatia Airlines in the near future".

I agree with you but unfortunately this is a done deal. They have already been given offers and are already in final phases of talks. Like someone said, this just to show that they have done everything possible not to sell but that it's a last solution.

You're talking nonsense, no deal has been made or there are no talks over the slots. The airline is owned by the Government of Croatia, the state. Only state can approve the sale of slots. As state didn't do so, there's no sale.

Any sale of state assets must be approved by the ministry in charge, as this is a transport issue, Minister of Transport must be informed and he must present it to the PM and the parliament.

As this wasn't the case, there's no sale. So please don't talk nonsense when you know nothing.

"I do not understand all the fuss concerning one destination. It is just one of our 35 destinations..."

Seriously? Are all those destinations as just as important as Heathrow, considering Monarch flights to Zagreb next year, the fact that Croats don't need visas to enter the UK, the fact OU has already flopped with Gatwick several years ago...

'whether relinquishing slots is the only option for maintaining liquidity at the company'

Does this mean that without the sale OU will face liquidity issues? If yes then Croatia Airlines is about to go bankrupt.

Second:

'Mr Kučko added the company is unable to compete against British Airways, which handles a significant number of transfer passengers'

This statement only goes to show how clueless this man is. It is not like BA stole these passengers from OU which, anyway, carries mostly O&D traffic between London and Zagreb. If BA had any effect on OU then it would be on their flights to MUC, FRA and VIE.

Also, it says a lot about Croatia Airlines if they can't compete with BA which will soon become a glorified lowcost carrier.

Another thing is that the market between ZAG and LON might be relatively low-yielding so LHR might not the best airport to serve it from. We should not forget that slots are not the only thing that is expensive at LHR, taxes and charges are also very high. Are passengers willing to pay €300 to €400 to fly to LHR like they do with JU? If no then OU better pack its bags and move to LGW.

Air Serbia might be charging disgustingly high fares to LHR but they are chronically full, even in winter despite facing competition from Wizz Air. LHR is somewhat of a premium airport and like any other premium product, it requires a premium clientele.

OU has much bigger prices than BA, and LF is huge, more than 90%. That means there is no effect from British. In same time if Mr. Kučko, especially with those prices and LF, can be in red with LHR one should ask about his competence.

Then it can only means that OU's prices are too low in relation to their cost structure. Didn't people on here say that a ZAG-LHR flight costs around €250? Maybe that's too low for an airport like LHR.

I am sure BA is not losing money on this route and they do carry mostly O&D traffic so Kucko's statement is wrong.

Exactly, there's something fishy here. Mr Kucko is trying to save his ass, by selling slots he can make some profit for himself, no one will hire that man after he is kicked out of OU in April.

His only skills are at best sales and even at that he sucks. OU needs a new head and ideally someone who knows airline business and has considerable experience.

Croatian Airlines is a Croatia's flag Carrier, a country that is among most popular tourist destinations in the world. And Mr Kucko can't make a profit on the one of the most important travel routes????

Plane is packed on each flight to Heathrow, problem isn't the price, problem is that OU offers no real business premium on the plane, I've flown the route many times and I can tell you I didn't see the business class seats.

And €250 price is mostly when they have promotions, normally price is around €350 return.

So, An. 5:36, you are saying that Monarch opens 5 weekly ZAG from both LGW and MAN, with 180-220 seater, because there is no demand for ZAG in the GB? Probably you think the same about ZAG and Koreans, Americans, Spanish... (list is quite long), and some people simply ignorant and unwilling to accept (new) reality

These slots could be a big money as we know that LHR is full and limited with arround 680 daily pair slots. LHR slots are more like good bonds or stakes and the grey market and trading with them even make them more expencive. LHR slots are highly demandig stuff. The familly silver of each carrier

One should ask Minister if Government can sell Adriatic see (to Italians for example). Country is in deficit, we need money for so many thinks, and part of cost (islands for example) are too expensive to govern.

I don't see difference in selling national treasure and potential as is Adriatic see of LHR (not in quantity but in principle).

This service is only 2 times weekly and mainly focused on P2P-holiday traffic and that's not the focus of OS. There's still the chance of OS introducing flights to Nis but most probably with a higher frequency and op by DH8

Just why are you all being drama queens about the LHR slots? Who cares about this bloody expensive airport or for the prestige? OU can fly to STN or even SEN because they will face tough competition with ZB on the LGW route.Few airlines in the region now fly to LHR: JU, RO, FB and A3. That´s it.

Alen, please. Will OU be the only airline selling its slots at LHR? Give me just 1 good reason why OU should continue flying to LHR? Transfer? O&D? Croats in N. America will use BA because it simply has much more destinations and agreements. Take as an example FB, they face fierce competition with BA but rely on their good agreement with VS and UA. The same with A3. OU just lacks agreements with bigger airlines to generate continuous or enough traffic.

Anonymous 11:08, croatia is one of the most important destinations for the British, it's not about selling the slots in general, it's about what will come afterwards... You see, Croatian tourism has significant growth each year, besides, there are domestic routes as well, it would be nice for someone in our stupid government to have some strategy in order to preserve our national carrier.

That's right NEMJEE A3 is a private company from the start and has got nothing to do with other airlines in the region. It's managed by well educated in aviation businessmen and not by politicians. They count every step they make because mistakes are gonna be paid by them and not by the country's tax payers.

Zagreb is visited by 45 000 Brits each year, who generate around 110 000 nights in the city. Especially in Xmas time. Zagreb gets more tourist than many coastal resorts, and it has just started, Zagreb numbers are growing @10-12% per yoy. This year Zagreb is expecting 1.2 million tourist, next year add 10-12% and so on.

Let me remind you once again:"However, both the carrier and the government will discuss one final time whether relinquishing slots is the only option for maintaining liquidity at the company."So, OU is far from doing fine.

This is if the UK leaves the EU. Heathrow is still important hub, just as Paris, Frankfurt and Amsterdam are. Heathrow was very busy airport before UK joined the EU, this won't change after it leaves the EU, if it leaves the EU that is.

With the labor market environment OU enjoys plus the Croatian tourism boom and complete access to high yielding EU, OU and the management really have absolutely no excuse for not being able to have a profitable and growing airline. Was not long ago, that OU and to some extent Adria as well, were the leaders in the region when it came to innovation and first. What has happened here in a few short years is nothing short of a travesty!

If the sale does not go ahead, I think it should be the end for Kucko.

I just hope they find someone with good airline based management and who is motivated (very important) in seeing the region and Croatia Airlines becoming a regional leader again!

Kucko must go, said it many times, sadly he stayed on for too long, did the damage that might be too hard to recover from. That man is not fit to run a public lavatory let alone an airline. OU should be making massive profits now the oil prices are so low and number of people visiting Croatia is at all time high. USKOK time. Kucko should be behind bars not behind CEO desk.

Really guys? This is 1 single destination - ONLY ONE! OU will sell the slots and decrease loss, what´s the big issue? At least they are not in the hands of EY, still a Star Alliance member, think positive!

Spanair was also a member of Star Alliance and we all know how that story finished.OU would like very much to be in someone's hands (including EY) but nobody actually showed the interest although Croatia has many tourists every year. Think about it.

when Adria decided to pull out from London alltogether, not only LHR, it was done by some brilliant financial wizzard kid, who said - if you are loosing money on the route, kill the route. Not make it profitable, kill it. So they went and pulled out of London. You must be total idiot to listen to such crap, let alone realise it! But so they did and killed Paris and London. It is not unimportant, that the CEO at the time was exactly same jerk as OU CEO, actually, he had zero experience in aviation, he came from engineering company....

What about people who have paid money for tickets between now and the second part of 2017, who have booked car parks, hotels etc. An international carrier should not expose passengers to such uncertainty not least because ticket sales will inevitably suffer so the whole thing becomes a self-fulfilling loss enhancer

A thought which the CEO might care to consider, persons who have paid good money for tickets into 2017 are not 'just another route,' They are human beings with lives who have bought tickets based on advertised services.' A very different tone from the puff which I get to read at the front of Croatia Airlines inflight magazine.

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